Complications arise over healthcare choices

The U.S. Department of Health and Human Services (HHS) issued a proposed rule delaying by one year, until 2015, a requirement that government-run health insurance exchanges offer small businesses the opportunity to select among competing plans through health care reform’s Small Business Health Options Program (SHOP). HHS cited administrative delays that will prevent the exchanges from meeting the original deadline for including SHOP options. The exchanges are intended to be available by October 2014 for plan year 2015.

The proposed rule was published on March 11, 2013, but the provision delaying SHOP’s implementation was not widely commented on until the New York Times reported about it on April 1, which also was the final date for submitting comments to HHS. A final rule is expected shortly.

Under the HHS proposal, in 2014 the exchanges that will be run fully or in part by the federal government on behalf of 33 states would offer only one SHOP plan to small businesses, rather than allowing them to pick from a range of competing options. The 17 states that have opted to run their own exchanges could choose to enact a similar delay or to implement the SHOP in full for 2014.

As described in an earlier HHS factsheet, the SHOP will allow small employers to offer plans from multiple insurers to their employees but receive a single bill and write a single check. Small employers purchasing coverage through the SHOP might be eligible for a tax credit of up to 50% of their premium payments if they have 25 or fewer employees, pay employees an average annual wage of less than $50,000, offer all full-time employees coverage and pay at least 50% of the premium.

The federal government will structure the SHOP on the exchanges it administers. Exchanges run by the states (and the “partnership” exchanges run jointly by states and the federal government) will decide how their SHOP is structured, and will have flexibility with regard to:

Size of small businesses that can participate. States can set the size of the small group market at one to 50 or one to 100 employees until 2016. In 2016, employers with between one and 100 employees can participate in the SHOP. Starting in 2017, states have the option to let businesses with more than 100 employees buy large group coverage through the SHOP.

Structure of choices for small businesses. Exchanges can choose to offer employers additional ways to provide coverage through the SHOP, including allowing their employees to choose any plan in all levels of coverage or a traditional “employer choice” offer of a single plan.

Delay criticized

John Arensmeyer, founder and CEO of Small Business Majority, an advocacy group, called the proposed rule “a major letdown for small business owners and their employees looking forward to robust, competitive exchanges in 2014.”

“We understand the proposed rule would only delay employee choice and simplified payments for one year. However, both of these are key in distinguishing the exchanges from the outside health insurance market, which is why we strongly advise against the finalization of these rules,” he stated in a media release.

“By including employee choice and a simplified, employer-friendly billing process in the health insurance exchanges, the Affordable Care Act can reverse a longstanding market trend that has left small employers on unequal footing for too long. These kinds of benefits have historically been reserved for large businesses and public employees, while small businesses often have to offer a ‘one-size fits all’ plan with added administrative hurdles,” Arensmeyer stated in the release.

Also taking issue with the delay was House Small Business Committee Chairman Rep. Sam Graves, R-Mo., who on March 27 wrote to the administrator of HHS’s Centers for Medicare and Medicaid Services about his concerns. “Under the proposed rule, small employers wouldn’t be able to select a benefit level on federal exchanges, but would be limited to offering a single plan for their employees, severely limiting the breadth of choice that was originally envisioned, which could lead to increased premium costs,” noted Graves, who opposed passage of the health care reform law.

“If one of the key goals of supporters of the health care law was to provide small business owners with a competitive process by which they could select from a number of affordable health insurance plans for their employees, then that goal is not in sight,” Graves added. “In the meantime, it is likely that entrepreneurs will continue to experience the premium increases they have come to expect.”